Basic funding and third-party funding of higher education institutions

Higher education institutions essentially finance their research and teaching from so-called basic funding, which they receive from the respective federal state. The medical universities in particular receive considerable additional funds through operating their hospitals, which primarily serve the purpose of providing healthcare. In addition, researchers raise funds for projects which are usually subject to a time limit: these funds are awarded by way of competitive procedures. The latter are referred to as third-party funding.

The Federal Statistical Office uses the following definition:

Even though this definition explicitly includes funds for teaching, third-party funds predominantly go into research.

Dynamic development of basic funding and third-party funding

The Federal Statistical Office has regularly carried out surveys of basic funding and third-party funding since 1997. While the Funding Atlas itself only focuses on the years 2013 to 2022, we have visualised the entire time series from 1997 onwards for this data story. The figure shows that both types of funding have increased significantly over the years. In total, higher education institutions received ongoing core funding of just under €27 billion in 2022. This compares with third-party funding income of €10.4 billion. At the beginning of the time series, the amounts were €12.5 and €2.4 billion (converted from DM).

Increase in third-party funding ratio after a long period of stability

As the figures shown in the chart are not adjusted for inflation, the relationship between the two types of funds is of particular interest. This is referred to as the third-party funding ratio (more precisely: the share of third-party funding in the higher education institutions’ income, excluding administrative income): it was 28.0 per cent in 2022.

The long-term series since 1997 shows that the third-party funding ratio initially increased from 16 per cent to 28.1 per cent up until 2013, before remaining relatively stable with a range of 26 to 28 per cent for many years – if anything showing a downward trend. The fact that the rate rose further to 28.0 per cent in 2022 after a slight increase in 2021, almost reaching the previous high of 2013, indicates a possible trend reversal.

The weighting of individual third-party funding providers has changed significantly over time

Looking at the share of third-party funding income accounted for by the individual funding providers, the federal government can be seen to have significantly increased its share of third-party funding for higher education institutions over the years.

While the higher education institutions’ income from federal government third-party funding was 23.5 per cent in 2003 and at one point only 19.3 per cent (2005), the German government was the higher education institutions’ largest provider of third-party funding for the first time in 2022. This includes all research project funding provided by the federal ministries (not just the BMBF) under the various funding programmes.

The DFG’s share of higher education institutions’ third-party funding income has remained relatively stable over time at around one third. The DFG had the highest share in 2009 at 34.8 per cent; in 2022 its share was 31.5%.

By contrast, third-party funding from industry has been in decline almost continuously, decreasing significantly over time. While the proportion was 26.7 per cent in 2003 and as much as 28.1 per cent at one point (2005), it was just 14.7 per cent in 2022.